Subledger accounting in Oracle EBS R12

Subledger accounting in R12 is an enhanced accounting process.

The SLA process allows customers to personalize the process for
specific events. The user sets the rules to be followed. Accounts
are still defined the same way as prior application versions via the
same forms. Organizations are defined the same way. If there are
no rules entered into the SLA engine, the accounts defined the
traditional way will be used to generate the journal entries posted
to GL. All setups to use preR12 functionality are automatic. The
default base setup is US GAAP. This uses the traditional account
definitions. This is delivered and works out of the box.
With SLA, account generation is now centralized as opposed to
each application being responsible for its own accounting. This
causes the setup steps for SLA to be the same across products,
i.e., Payables, Receivables, and Cost Management.
Benefits of SLA include:
- For customers users define and manage accounting parameters
in once centralized place. Users do not have to have different
setups for each subledger application.
- Gives customers flexibility to address different and changing
accounting requirements to meet business needs
- Allows users to define all components of the journal entry in a
simple way as opposed to generating accounting through logic
embedded in the accounting programs.
- Allows users to change accounting rules in response to new legal
requirement changes in business practices or acquisition of new

companies.
- Users can easily control and modify accounting rules. SLA tracks
all changes and ensures the programs creating the journal entries
are using the latest rules. This is called Compilation and is a
PL/SQL package that validates and checks the rules that are being
used.
- SLA rules can be date based. So journal entries can be created
according to rules depending on accounting date of the
transaction.
SLA Engine
SLA uses a rules-based accounting engine that posts entries into
GL. The rules used
by the engine are user defined. The rules are stored in a common
repository for all subledger applications.
A subledger application would be a product area, such as
Inventory, Payables, Receivables, Purchasing, etc. The R12 SLA
process has created a common accounting process to be used
across all applications.
This allows the customer to have a single method for defining
accounting behaviors. For R12, the subledger application for
Inventory and Purchasing are combined into the subledger Cost
Management.
The SLA process allows for the display of the inventory valuation
accounts to be seen for a user defined date range. The engine
also allows the accounting department maintain control over
accounting and chart of accounts.
When rules are created, the rules engine will override user
entered accounts that might be incorrect. This is important to
control user errors that can occur within a period. The rules will

automatically redirect the costs to the correct account. The rules

can be created for most item attributes to allow for granularity of
costs if the customer requires this level of detail.
Pre-R12 Accounting Process:
A transaction is received and accounted for in the local subledger
-orA transaction is costed and accounted for in the local subledger
The transaction is specifically passed to GL via the Transfer to GL
process.
View Accounting Windows will then show the details for these
transactions.
R12 Subledger Accounting Process:
After the Rules are established, the Cost Management SLA
responsibility allows for the creation of the user-defined
accounting data. The request group related to this process
includes all SLA processes as well as standard accounting
processes. A transaction would be received or costed.
SLA uses events for processing transactions. An event is the
recording of a change of status in the transaction life cycle, i.e.,
invoice approved, payment received, period close, etc. This allows
for a clear separation between transactions and accounting
representation. Events are the bridge between transactions and
journal entries, so product teams are involved for coordinating
actions based on event models.
R12 Subledger Accounting Rules:
SLA uses a rules-based accounting engine that posts entries into
GL. The rules used by the engine are user defined. The rules are
stored in a common repository for all subledger applications. A
subledger application would be a product area, such as Inventory,

Payables, Receivables, Purchasing, etc.

The R12 SLA process has created a common accounting process
to be used across all applications. This allows the customer to
have a single method for defining accounting behaviors. The
engine supports the use of multiple currencies. This also allows for
various audit tools and reports to be used when reviewing GL
postings.
The SLA process allows for the display of the inventory valuation
accounts to be seen for a user defined date range. The engine
also allows the accounting department to maintain control over
accounting and chart of accounts for the ledgers used.
When rules are created, the rules engine will override user
entered accounts that might be incorrect. This is important to
control user errors that can occur within a period. The rules will
automatically redirect the costs to the correct account. The rules
can be created for most item attributes to allow for granularity of
costs if so desired.
Basic Steps to Build Accounts:
These steps are needed for each different journal line type that is
going to be used. For example, Inventory valuation, Receiving
valuation, WIP valuation, Cost of Goods Sold.
Step 1 Create Account Derivation Rule (ADR)
Step 2 Define conditions required for the ADR created
Step 3 Create Journal Line Definitions (JDL) for an event class
a- query the LOV of seeded event classes
b- copy the seeded event class using the Copy Definition button
c- replace existing ADR in the Journal Line type form with the new
ADR

this is in the Line Assignments sections, using Line Type

Step 4 Create new Applications Accounting Definition (AAD)
The responsibility to use is Receivables : Setup > Accounting >
Accounting Methods Builder > Methods and Definitions >
Subledger Accounting Methods
a- query for the seeded AAD
b- copy from this to create a new AAD
c- associate the new JLD assignments created in Step 3
d- validate the definition. If successful continue to next step or
continue creating the JLDs required. If unsuccessful, check the
setup for all steps above before moving to next steps.
Step 5 Associate the new AAD with the Subledger Accounting
Method (SLAM)
a- query SLAMs to view existing methods
b- for the existing AAD enter an end date to stop this from being
used
c- attach the new AAD with the start date
Step 6 Assign the SLAM to the Ledger
The process is built from the bottom up.
Ledgers replace Set of Books.
The 3Cs are now known as the 4Cs:
Chart of Accounts
Calendar
Currency
Accounting convention

This allows for accounting to be used at the local level (by

country) and also by the line of business (sales, consulting, etc).
The Ledger and Ledger Sets (group of Ledgers) use the Multi-Org
Access control (MOAC) that is expanded in R12.
Examples of Subledger Methods (SLAMs)
US GAAP
FRENCH GAAP
Cash Basis Accounting
Accrual Basis Accounting

The following SLAMS are seeded in Oracle:

Standard Accrual
Standard Cash
Encumbrance and US Federal
Product teams are responsible for the following:
Identify transaction entities with accounting impacts
Define event types that correspond to different status in the
lifecycle
Create events for transactions when passing from status to
another this is transparent to the customer although the creation
is triggered by the user action.
Define transaction objects that provide data that SLA uses to
create journal entries
Population of transaction objects is the responsibility of product
teams
SLA Team is responsible for the following:

Defining data model for events

Develop/Maintain programs and APIs that create and maintain
events and related objects
Processing events as part of the Create Accounting programs
Events
Event Entities have Event Classes. Each Event Class has Event
Types.
There are four Main Entities for Cost Management:
Inventory:
Material Accounting Events
Event Classes:
PO Delivery in Inventory
Sales Order Issue
Internal Order to Expense
WIP Material
Consigned Inventory Ownership Transfer
Miscellaneous
IntraOrg transfer
Direct Interorg Shipment
Direct Interorg Receipts
Intransit Interorg Shipment FOB Shipment
Intransit Interorg Receipt FOB Receipt
All other intransit interorg transactions
Material cost update
Retroactive price adjustment
Logical Intercompany

WIP Material Lot

Purchasing/Receiving
Write Off Accounting Events
Receiving Accounting Events
Work in Process:
WIP Accounting Events
Event Class:
WIP Absorption
Event Type:
Resource Absorption
Resource Overhead Absorption
Scrap Absorption
Outside Processing
Event Type:
OSP Transaction
ShopFloor Delivery for Direct Items
IPV transfer to Work Order
WIP Variance
Event Type:
Period Close Variance
Job close Variance
Final Completion Variance
WIP Lot
Event Type:
WIP Lot Split
WIP Lot Merge
WIP Lot Update Quantity

WIP Lot Bonus

WIP Cost Update
Event Type:
WIP Cost Update
The Work in Process list above shows the Main Event Entity is WIP
Accounting.
The Event Classes are then listed with each Event Type that is part
of the Event Class.
Definitions:
Accounting Methods Builder
This is the process that created a SLAM and assigns it to the
Ledger.
Ledger
The ledger determines the rules that are applied when accounting
is generated. Ledgers replace Set of Books. Each Operating Unit is
associated with a Primary Ledger. Multiple Legal Entities can be
tied to a Ledger through the accounting set up flow. Multiple
SLAMs can be assigned to a Ledger. There can be a primary and
Secondary ledger setup that can use different accounting methods
in each ledger.
Subledger Accounting Method (SLAM)
This is the subledger accounting method that is built and assigned
to a Ledger. This will be created via the Accounting Methods
Builder and includes all the details needed to created the
appropriate journal entries.
Application Accounting Definitions (AAD)

The application accounting definitions is made up of the Journal

Line Definition, Journal line types, and Accounting Derivation
Rules. These are developed using the event classes and types. A
new AAD can be created or a seeded AAD can be used. The
details are assigned and validated to be certain the setup at this
level is correct.
Journal Line Definitions (JLD)
JLT, ADR and JED are combined to create the JDL for an event.
These can be shared across AADs and can be used to create sets
of line assignments for event classes and types.
For Cost Management, The Journal Entry Description is not seeded
by default in Costing application accounting definition. This has
been submitted as an enhancement request.
Journal Line Types (JLT)
The types are defined for each particular class to be used. These
must be assigned to the Journal Line Definition (JDL) to be used.
These determine the journal entry line options to be used. These
options include identifying the natural side used (debit, credit,
gain/loss), accounting class, summarization, and other conditions
that will cause the rule to create a journal entry.
Account Derivation Rule (ADR)
This is used to determine the accounting combinations that will be
used for the journal entries. Various rules can be defined. These
can be defined by segment, accounting combination, or value set.
The simplest way to derive an account is to establish the account
as a constant value-use the account combination that is defined in
the accounting chart of accounts.
Mapping Sets
These sets are optional and user defined. If the user determines

that the seeded details are insufficient, then mapping sets can be
setup to allow for more specialization in the accounts. This is not
supported by development as this would require customization.
Seeded details are supported as they are provided by Oracle code.
Transaction Objects/Sources
Transaction objects and sources carry transaction information into
the rules defined for the accounting chart of accounts.
Event:
An event is the recording of a change of status in the transaction
life cycle, i.e., invoice approved, payment received, period close,
etc. These are defined for each
SLAM used. Event classes and event types are used to create the
events to be used
Event Class
This classifies the types of transactions that are to be accounted
for. An example of an event class is WIP Variance.
Event Type
This defines actions that are possible for an event class that has
potential accounting significance. Examples for the WIP Variance
Event CLASS would have event TYPES defined for Period Close
Variance, Job Close Variance, and Final Completion Variance.
Profile Options for SLA:
SLA: Enable Subledger Transaction Security in GL
SLA: Enable Data Access Security in Subledger
SLA: Additional Data Access Set
SLA: Allow Reports Journal source Override
*These first 4 are used by GL for overall setup of SLA for GL
SLA: Enable Diagnostics

This is only enabled when there are errors in the Create

Accounting process.
The value is set to Yes and then the Create Accounting process is
run again. The details are then captured and can be reported in
the Transaction Objects Diagnostic Report. Because of
performance issues, the profile option needs to be reset right
away to turn this off and the System Administrator can run the
Purge Transaction objects Diagnostics process to clean up the
tables.
CST: Receiving Accounting Option
This profile option controls whether the Receiving Transactions
Processor creates the accounting entries online or if the
transaction accounting entries need to be created via the Create
Accounting process.
Cost Management- SLA Responsibility
This is a new responsibility that allows for the setup of SLA and
also to access the Create Accounting Cost Management process.
The Create Accounting process that can be used for receiving
transactions are Create Accounting Cost Management ... Use
Process Category = Receiving
OR
Create Accounting Receiving.
This last process, Create Accounting Receiving, is part of
Purchasing responsibility and can only be run for receiving
transactions.
For Accrual reconciliation:
---------------------------

The R12 Accrual reconciliation process will use the accounting

entries from SLA as SLA is the source of truth for the real
accounting entries. Hence the accrual load can not report any
transactions prior to SLA upgrade start date.
Most users processing the receiving transactions would use
instead of the Create Accounting - Cost Management is run via the
Cost Management SLA responsibility. This responsibility should
have more security and restrictions from users.
Project Manufacturing and SLAFor the GL posting option set to manufacturing, the cost collector
will continue to post the transaction information just as before.
The cost collector will pick the account information from
mtl_transaction_accounts and wip_transaction_accounts. So if the
user has set up any account derivation rules in SLA, they will not
be respected by the cost collector.
For the other setup option, i.e when GL posting is set to Projects,
depending on whether the auto accounting option has been set to
yes or no, the accounts will be passed in or not passed in. If the
auto accounting rule option has been set to Yes, no accounts will
be passed to Oracle Projects by the cost collector. In this case, the
user is responsible for setting the auto accounting rules in Oracle
projects setup to derive the accounts. If the auto accounting
option has been set to No, the accounts will continue to get
passed in just as before (from MTA and WTA).
However, the cost collector will pass in the distribution link from
MTA and WTA to Oracle projects. This distribution link will enable
Oracle projects to link the distributions created in SLA tables back

to the MTA and WTA tables. The distribution links are stored in the
columns inv_sub_ledger_id and wip_sub_ledger_id in the MTA and
WTA tables.
Periodic Average Costing and SLA - Presently there is no
support for SLA for Periodic Average Costing. This is on the
enhancement list but as of 12.1.1, this is not supported but is still
under review from product development.
Some Reports that have been changed:
CSTRSCCR Supply Chain Cost Rollup
CSTREIVR - Elemental Inventory Value Report
With Implementation of Subledger Accounting Architecture feature
in R12, the role of Cost Group/Sub Inventory is limited to
maintaining the Unit Cost in the Reports. All the Account
Generation for Transaction will be taken care by SLA Engine rules.
So all account-related information has been removed from the
valuation reports.
The following cost hook is impacted: CSTSCHKB.pls. The
SLA setups will take the place of the std_cost_dist_hook, which
allows the user to modified the accounts that are used for
distributions. This will no longer be used as the user can use
standard SLA process for this.
Troubleshooting suggestions:
1- Review logfile for the Create Accounting Cost Management
2- Enable FND: Debug to provide more details
3- Review the Transaction Objects Diagnostic Report
4- Confirm transactions are costed successfully via cost Manager

5- Check if the Create Accounting Cost Management process is

successful when using traditional accounts.
6- Run the Subledger Period Close Exceptions Report and review
errors, if any.